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Waldo Mushman
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At first glance many situations appear obvious. Rigorous examination may reveal that the obvious is in fact impossible. My focus is on companies that unethically sell the impossible and thrive only with financial slight of hand. I am a retired businessman living near Austin Texas and I both... More
  • CSKI Has A Secret Subsidiary 0 comments
    Oct 14, 2009 11:16 AM | about stocks: CSKI
    Shareholders of China Sky One Medical (OTCPK:CSKI) a China based manufacturer of mass market Chinese nostrums should probably wonder about a subsidiary that CSKI bought last year. The Chinese government strictly enforces ownership disclosure. As of March 23, 2009 official government records report 100% ownership of Harbin Chenlong Medical Development by CSKI/Harbin TDR (1), acquired in 2008 but yet to be publicly disclosed.
    2008 was not a great year for Chenlong. Audited financials filed on March 23, 2009 and signed by CSKI officers (2)show zero revenue and a loss of CNY 608,040. Most of the loss was due to "Management Expenses" of CNY 612,703. But Chenlong would seem to be a major player based on recent transactions in which it was a principal. As an example, official documents filed on April 24, 2008 (6)record Chenlong selling a 74.5% ownership position they held in another company. The total price reported in SEC filings was $8.3mm. Chenlong’s share should equal $6.18mm (~ CNY 42mm) for the 74.5% they owned. Unfortunately the 2008 annual report for Chenlong (2) doesn't reflect this massive transaction.
    And now the story gets a little messy because Chenlong sold the $6mm stock holding to CSKI/Harbin TDR. The stock they sold was a 74.5% position in Heilongjiang Tianlong Pharmaceutical Co., Ltd, which may sound familiar. Lets jump in the way-back machine for a look at how this chain is linked.
    Chenlong was formed in 2000 with six shareholders (3). Mr Wu Jie-Chen was Chenlong’s biggest shareholder and also general manager of Tianlong at the time. The other 5 shareholders may have also worked at Tianlong. In 2004 Chenlong contributed capital into Tianlong and became holder of 74.5% of Tianlong's stock (4). We move forward to year end 2006 and CSKI becomes involved….
    LOS ANGELES, Calif., Dec. 13 2006/Xinhua-PRNewswire-FirstCall/ -- China Sky One Medical, Inc., has announced that a strategic agreement was reached between Liu Yan-qing, president of China Sky One Medical, Inc. and Mr. Wu Jie-chen, president of Heilongjiang Tianlong Pharmaceutical Company. As a result of this agreement, CSKI will acquire all of the products, dealership, marketing network of Tianlong Beijing office and the Beijing office staff for USD $381,700.
    The purchase may have been more extensive than described. Government records dated March 3, 2008 (5)show that CSKI had contributed CNY 10mm into the company February 27, 2007. This document primarily documents the transfer of 100% of Chenlong stock from the original six shareholders including Wu Jie-Chen to CSKI/Harbin TDR. There is no disclosure from CSKI about this acquisition. Effective March 3, 2008 CSKI is 100% owner of Chenlong and indirectly owns 74.5% of Tianlong. And 30 days later.....
    On April 3, 2008, ….TDR acquired 100% of the issued and outstanding capital stock of Heilongjiang Tianlong from Heilongjiang’s sole stockholder, Wu Jie-Chen a resident of China, in consideration of approximately $8,300,000, consisting of (i) $8,000,000 in cash, and (ii)23,850 shares of China Sky One    From CSKI November 2008 10-Q
    The transfer of Tianlong shares to CSKI/Harbin TDR from its wholly owned subsidiary Chenlong was dutifully recorded on April 24, 2008. Mr Wu Jie-Chen was not referenced in this transaction probably because he was no longer a shareholder (6).
    The list of reasonable questions might start with, "What in the name of Sweet Jesus is going on around here?" Each link in this chain is undisclosed, misrepresented or self dealing. The auditor for CSKI, MSPC, charged with protecting the public interest apparently remains unaware of any of these documented events.
    Documents at waldomushman.com/chenlong.html

    I am Short and trying to get shorter.
    Stocks: CSKI
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